Ethereum

The logo of Ethereum, the blockchain on which the majority of NFTs reside. (Image credit: Shutterstock / Overearth)

Will digital art ever replace that priceless watercolor hanging on your wall? It’s doubtful, as physical arts such as paintings, sculptures, and photography will always hold value to collectors, whether it’s sentimental or monetary.

There is also a dark side to the world of NFTs, which is currently subject to no direct regulatory guidance, although it’s possible the US government could categorize NFTs as securities or commodities in the future. Like fine art, NFTs are only worth what people will pay for them and the level of volatility in the NFT (and cryptocurrency) space is extreme. No investment is ever a guaranteed success and the NFT field is purely speculative, so it’s easy to lose money with NFTs if you’re not careful.

Artists are also at risk of art theft, plagiarism, and fraud, with the virtual world giving users anonymity that unscrupulous art thieves can use to their advantage. NFTs also raise some concerning environmental issues, as the Ethereum blockchain on which most of them sit demands a huge amount of energy to sustain itself. 

As with any unregulated space, there’s plenty that can go wrong, with concerns that the NFT market can be used as a type of pyramid scheme, which sees early investors making huge gains but newcomers struggling to recoup their losses. 

The allure of digital art investing is appealing to many and can be a lucrative and fun way to support the creative arts, but as with any new investment, caveat emptor

Blockchain

If you’ve ever dabbled in Bitcoin, you will have utilized blockchain technology – only probably without knowing it. A blockchain is a digital ledger of transactions that provides a high-level of security and transparency. While blockchain has many uses, it plays an essential role as the ledger behind most cryptocurrencies, including Bitcoin and Ether.

In the future, however, the role of blockchain is likely to expand, as it can also be used to verify digital identity, store and protect data, and allow for secure digital voting — all essential elements in keeping people safe in a digital world.

With companies increasingly accepting cryptocurrency as payment and El Salvador becoming the first country to make Bitcoin legal tender, more and more of us are investing in digital currencies and therefore becoming dependent on the security of blockchains to protect our finances.

But just like the Matrix itself, the long-term importance of cryptocurrency may turn out to be an illusion that we’ve bought into. As with NFTs, the crypto market is decentralized and speculative, and it’s also the largest unregulated market in the world. While investors have been lured in by the lucrative growth in Bitcoin, as well as the opportunity for disintermediation and higher levels of financial privacy it affords, cryptocurrencies aren’t backed by any government or bank or FDIC insurance, making them riskier than traditional currencies.

Cryptocurrencies

(Image credit: Shutterstock / Wit Olszewksi)

The lack of regulatory oversight and anonymity associated with crypto also makes it attractive to the nefarious characters of the digital world. It’s harder to track and trace so it appeals to criminals, with digital currencies used for ransomware attacks, money laundering, dark web transactions, terrorism, and illegal drugs on an international scale. 

While a recent study estimated that only 3% of Bitcoin transactions involve illegal activity and authorities are becoming better at analyzing transactions on a blockchain, that’s not to say the technology isn’t still problematic.

Many investors, especially younger ones new to the market, turned to crypto during the pandemic as a new hobby — it’s thought that 16% of American adults owned or invested in crypto in 2021. While it’s clear demand is higher than ever before, do we, as a society, want to be moving our investments and finances into an unregulated, digital world? 

Increased governmental oversight is one way to manage the risks of crypto — the Federal Reserve and US banking regulatory bodies have officially added cryptocurrency to the agenda for 2022, with plans to discuss regulatory standards, crypto-backed loans, and liquidity requirements for banks. As crypto becomes more mainstream, some form of regulation seems inevitable, giving authorities more power to curb illegal activity.

But how can you effectively regulate a currency that’s completely decentralized and doesn’t fall under any particular jurisdiction? While governments around the world are working on it, there are more questions than answers at this point.

The metaverse

In The Matrix, Neo is offered a red pill or a blue pill. The blue will send him back to the familiar comfort of the Matrix, while the red will bring him into a harsh and uncertain reality. Today, this iconic set piece feels more relevant than ever, with the emergence of the concept of the metaverse.

The metaverse is imagined as a place where users connect online, in virtual spaces, with the help of virtual reality headsets and other technology. Represented by your avatar, you will be able to move through the metaverse just as you would in real-life. In the metaverse, you can attend virtual meetings, go to concerts, shop, and attend conferences, all from the comfort of your home. And yes, you’ll be able to display your NFT purchases within the metaverse — that you purchased with blockchain-based cryptocurrencies. 

It’ll be an important part of Web 3.0, the latest imagining of the internet as a decentralized space where users have more autonomy, control, and connection opportunities without a central authority.

When Facebook CEO Mark Zuckerburg announced in October that the company was changing its holding company name from Facebook to Meta, signaling an increased focus on the metaverse, millions wondered what that meant for the future and how intertwined our lives might become with virtual reality. But it’s not just a Zuckerberg pipedream; scores of corporate giants have already invested serious resources into the metaverse.

Tech heavyweights like Sony and Microsoft see huge value in a fully-realized metaverse, but even retail companies like Chipotle and Nike are ready to sell their virtual products in this new virtual world, and investment funds are springing up to help investors get a piece of the pie.

metaverse

(Image credit: Shutterstock / is.a.bella)

It might sound appealing, but the metaverse is also fraught with